ou work for a nuclear research laboratory that is contemplating leasing a diagnostic scanner (leasing is a common practice with expensive, high-tech equipment). The scanner costs $5,100,000 and would be depreciated straight-line to zero over four years. Because of radiation contamination, it will actually be completely valueless in four years. Assume that the tax rate is 22 percent. You can borrow at 6 percent before taxes. What would the lease payment have to be for both the lessor and the lessee to be indifferent about the lease? What is the break even lease payment?
Calculation of Break even Lease Payment | |
Scanner Costs | 5,100,000 |
PVIFA (6% ,4years) | 3.465 |
Desired Cash Flow after tax | 17,671,500 |
Less : Depreciation (5,100,000/4) | 1,275,000 |
Earnings after tax | 16,396,500 |
Add : Taxes @ 22% | 4,624,654 |
Earnings before tax | 21,021,154 |
Add: Depreciation (5,100,000/4) | 1,275,000 |
Break even lease payment | 22,296,154 |
ou work for a nuclear research laboratory that is contemplating leasing a diagnostic scanner (leasing is...
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